DGL Group Limited (DGL) Earnings Call Transcript & Summary

Good morning. It's a pleasure to welcome you to the Annual General Meeting of DGL Group Limited, our fourth since listing on the ASX in May 2021 and DGL's 25th year since the business was founded in 1999. My name is Tim Hosking. I'm a Non-Executive Director and Chairman of the company, and as such, I'll chair the meeting today. As we have a quorum, I'll formally declare the meeting open. And before going any further, I'd like to take this opportunity to introduce my colleagues in attendance today: Simon Henry, an Executive Director, CEO and Founder of the company; Robert Sushames, an Executive Director; unfortunately, John West, our other Non-Executive Director, is an apology today; we have Hanna Posa, our Company Secretary and General Counsel; and also in attendance today, members of the DGL senior executive team. I'd also like to welcome the company's auditors, Ken Weldin and [ Chaya Lal ] from PKF Melbourne, who are in attendance by video today to answer any questions relating to the financial report and the conduct of the audit process. Before going any further, I'd like to address a few housekeeping items. Shareholders attending today will have received a virtual AGM user guide with instructions on how to ask questions and what to do if you have any IT difficulties. As this is a virtual meeting, shareholders will be able to submit questions via the Q&A window. [Operator Instructions] Your question will be read aloud unless you indicate a preference to ask it aloud yourself. If you'd like to do so, please specify this when submitting your question. I'd also ask shareholders to type in questions separately. This way, we can give all shareholders a fair and reasonable opportunity to ask a question. If your question relates to the annual report or a specific resolution, we'll address the question when that item of business is put forward. And if we receive multiple questions that are similar, we'll try to amalgamate them into one or answer the broadest question, which will cover the others. Please keep your questions to the topic of each resolution. Any question not related to a resolution will be considered following the conclusion of the formal business of the meeting when we'll open the floor to questions of a more general nature. Please submit questions now if you haven't already. The company Secretary will moderate questions as they come through. As you'd appreciate, as a listed company, we can only respond to questions based on publicly available information. If you have a technical issue at any stage, please click the raise hand button and one of our team will reach out via chat to address your issue. We'll conduct the formal business of the meeting after an introductory address by me and an update on business activities by Simon. Both updates have been released to the ASX prior to this meeting. In these opening remarks, we've addressed some of the questions that have been asked by shareholders prior to this meeting. There are 4 resolutions for today's meeting. The other item of business is to table the company's annual financial statements and reports. The results of all resolutions will be lodged with the ASX and published on the company's website shortly after the conclusion of the AGM. Please note that as Chair, I intend to vote any open proxies, which I hold, in favor of resolutions 1 to 4, unless I've been directed otherwise. This includes where the resolution relates to the remuneration of key management personnel. The Board recommends that shareholders vote in favor of the resolutions. Any directors who have an interest in a resolution abstain from making a recommendation. There will be an opportunity to ask questions about each resolution before I put that resolution to the meeting. I will propose each resolution in order of the item of business and declare the number of valid proxies that I hold as Chair. I'll put all resolutions to the meeting and then call a poll on each resolution. I've appointed James Barrie of Fernville Group to act as the returning officer. If the shareholders already voted by proxy, you don't need to vote again unless you want to change your vote. Voting in the poll is entirely optional, but shareholders who haven't lodged their proxy beforehand are encouraged to vote on the poll. Before proceeding with the business of the meeting, I'd like to take this opportunity to say a few words, after which DGL's Founder and CEO, Simon Henry, will discuss our growth strategy, key drivers over the last year, and highlight our plans and objectives across our growth pillars. DGL has built a leading position as a provider of specialized chemicals, materials and services to an increasingly diverse range of essential industries across Australia and New Zealand. Our team of over 800 people served over 5,000 customers from 85 sites during the year. We are proud of our reputation for customer service and safety. The safety of our people and the environment is our foundation, and we are committed to ensuring that our workplaces uphold the highest standards, so our people can go home safely each day. One measure of our safety performance is our lost-time injury frequency rate. This improved with a reduction from 14.3 in FY '23 to 10.3 in FY '24. While this outcome is encouraging, it doesn't reduce our commitment to improve, and we are focused on further enhancements to our systems and process controls, investment in training, and maintaining a safe working environment. During FY '24, DGL demonstrated the resilience and diversity of its operations in challenging and volatile business conditions. The company delivered a solid result, despite a weaker economic environment, increased cost pressures, ongoing supply chain issues, and volatility in agriculture and commodity pricing. I generally prefer not to comment on our share price, but I do need to acknowledge that it's not where we want it to be. The last 2 years haven't been without challenges, and we know that the share price decline is a concern for all shareholders. I can assure you that your Board shares these concerns. We are very focused on delivering sustainable earnings growth, which we firmly believe will be reflected in a positive share price trajectory. We aim to do this by pursuing our focused growth strategy, with tighter cost disciplines, and by extracting greater operating efficiencies from integration of acquisitions made by the company. We are committed to creating long-term value for our shareholders. FY '24 was an important year for DGL. In addition to our focus on safety, we reshaped our senior leadership team and invested in upgrading our finance, management and HR systems as well as establishing new, shared group services to improve efficiency and simplify our operations. We progressed several strategic expansion projects, and took a more selective approach to acquisitions, all designed to deliver stronger and more predictable operating results in future. FY '24 revenue of $466 million and EBITDA of $64.6 million were steady compared to last year. Gross margins increased 6%, from 37% to 43% in FY '24, driven by lower raw material costs, improved product mix and economies of scale. DGL generated $37.3 million cash flow from operations in the year. Net profit after-tax of $14.3 million was down 18% on FY '23 after adjustment for non-cash deferred tax liabilities in the prior year. The reduction in profit was mainly due to cost inflation, with pressure on wages, higher interest costs, our increased head count, and increased competition impacting both price and volume in our Environmental division. We completed 5 acquisitions during FY '24 which added to our manufacturing and logistics capabilities, and we're being selective with acquisitions going forward, only considering them when we can see both strategic and financial benefits for the group. We continued our organic investment in several new or expanded manufacturing and water treatment facilities. These investments in plant and systems added to short term costs which impacted on net profit in FY '24, but they will benefit future earnings. Simon will expand on this shortly. We've received several questions relating to dividends. While we understand the value of dividends for some shareholders, our approach since listing has been to reinvest our earnings to grow the business. We are being very selective with acquisitions and investments, but we continue to see attractive opportunities for investment for the longer term benefit of the company and our shareholders. Our buyback program has been on hold. We intend to reinstate the ability to buy back shares but we'll remain opportunistic and pragmatic as to where we invest our earnings to deliver the best impact on shareholder value. Regarding the Board, we are continuing our search for an additional independent director to broaden the Board's skill sets and to increase independent representation as well as diversity. We will continue to ensure that the Board has the right mix of skills and experience to lead the company. One of the items of business at this meeting is approval of the company's employee incentive plan. The objective of this plan is to help attract, motivate and retain employees and to align employees' interests with shareholders through direct ownership of shares. Such plans are commonplace for listed companies and the directors consider DGL is currently at a disadvantage by not having an appropriate plan in place. Subject to shareholder approval, the Board intends to introduce 2 programs under the plan in FY '25. The first is an annual offer to all employees to purchase up to $10,000 worth of shares at a 10% discount to market value. We think that it's appropriate to offer this modest discount to encourage employees to become joint owners and to participate in the growth of the company. The second is an offer of performance rights to the CEO, the Chief Financial Officer and the Chief Operating Officer based on 50% of their base salary, where vesting and conversion into shares is dependent on achieving specific hurdles based on both earnings per share and relative share price performance over a 3-year period. The Board has been working hard to ensure that executive pay is appropriate and is aligned with the objectives of the business. We've benchmarked the proposed plan and the performance hurdles against similar companies, and the Board considers the plan to be conservative relative to market practice. DGL would need to outperform its peers significantly for the performance rights to vest in full, which would see all shareholders benefit. In closing, DGL remains in strong financial health, and recognizing ongoing cost pressures and economic uncertainty, we have a positive outlook for the current financial year. The group's strong balance sheet and cash generation supports ongoing organic investment for growth, with a very targeted approach to strategic acquisitions that can add value and capabilities to the business. I would like to thank all of DGL's dedicated employees and contractors, our leadership team, and my fellow directors for their commitment to the company. To our shareholders, thank you for your support. We value it and we don't take it for granted. We're working hard to improve our performance and to deliver the returns you are looking for. I'll now hand you over to Simon Henry.

Thank you very much, Tim, and I thank our shareholders for joining us today. I founded DGL 25 years ago after identifying the opportunity to provide a full suite of chemical and related services to meet the needs of industry and the community. DGL has grown to become a leading provider of chemical services from procurement, to formulation, packaging, storage, transport and logistics, and recycling and recovery, all requiring specialized skills, capabilities and licensing. Our mission, both then and now, is for DGL to become an integral part of the industries we serve. We do this by partnering with our customers, being their trusted service provider, known by our reputation for customer service, compliance and safety. We work in a highly regulated landscape that operates with good intentions in terms of safety and the environment, but has resulted in increased complexity, with compliance and regulatory overlays which mean new activities in our sector typically now take years, not just months for approval. This is an impediment to the growth in our industry. But it's also a competitive advantage for DGL due to the breadth and scale of our activities and the established facilities and operating licenses that we now hold. We will continue to expand our portfolio of licenses and build our capabilities by internal investment and by acquisitions where it is more efficient. We specialize in what we do, and we are very focused in meeting the highest regulatory and environmental standards across our operations. Since the company's IPO in 2021, we have grown from 26 to 85 sites; increased and diversified our customer base from 1,300 to over 5,000 customers across multiple industries; increased our staff from 280 to 800; grown revenue from $180 million to $466 million; and increased our EBITDA from $19 million to $65 million in FY '24. I'll touch on some of the highlights from our divisions over the last year. Warehousing and Distribution. In FY '24, we increased our chemical storage capacity to over 200,000 tonnes, allowing room for growth and extending economies of scale. We increased our overall storage capacity while consolidating sites to improve operational efficiencies and redeploy capital by selling non-strategic, generic properties. Manufacturing. We upgraded plant and equipment with larger and more efficient manufacturing capacity to drive long-term profitability. We have expanded our crop protection capacity by investing in new extrusion plants and a new manufacturing facility in Queensland to support future growth. We have broadened our customer base, diversifying across industries to reduce vulnerability to the impacts of weather and other variables. We aim to diversify further to lessen the seasonality of cash flow across the group. Environmental. Our new liquid waste treatment plant in Unanderra, New South Wales is still on track and is awaiting final regulatory sign-off. The plant will, once completed, substantially increase our capacity to treat liquid waste. Corporate investments. We've moved our head office to Parramatta, Sydney, the geographical center of our operations, bringing together key group management and our new shared services team. We have made a significant investment in developing a centralized service hub at our head office in Parramatta. This is a short-term cost for material long-term benefits. We've also invested in a group-wide ERP system which is being implemented successfully, and we've centralized our payroll functions. The growth in scale of the business has resulted in a warehouse management system project being no longer fit for our needs. We have ceased this project which will result in a nonrecurring write-off in the current half of approximately $1.2 million. These investments contributed to higher costs in FY '24, but they establish a lower cost platform to support more efficient future growth. We slowed our pace of acquisitions in FY '24, being very targeted on what we acquire to add to our capabilities, licenses and enterprise (sic) [ expertise ] to further our growth strategy. We have also focused on acquisitions where it would be more expensive or slower to build organically. In FY '24 we acquired Australian Petro Chemical Storage, a major hazardous facility for flammable chemical storage, allowing DGL to consolidate its operations and manufacturing of Class 3 flammable chemicals in New South Wales; Enlog Pacific, a specialist logistics business with an expansive customer base, allowing DGL to leverage its service offerings into the transport of specialist, highly regulated materials; the businesses Qblend and Flexitech, providing DGL with powder blending capability, broadening our chemical manufacturing and formulation services; the business of Katanning Logistics, a freight and warehousing facility south of Perth, expanding our geographic reach; and the business and land of Kinnear Transport, a purpose-built multi-class chemical storage facility in Perth. We've accomplished a lot, and we have more to do. I'd like to thank everyone at DGL for making our rapid growth possible. The credit goes to our team of 800 keeping our operations safe, protecting the community and the environment, and I thank them all for their efforts. Property. We have a pragmatic approach to our property strategy. We like to own and control properties that are critical to our operations due to licenses held specific to a property or where we have specialized manufacturing or processing facilities. We are agnostic about owning generic property such as warehouses. During the current half year, we have sold 3 properties, with 2 awaiting settlement, for a total of approximately $18.7 million. One property, a warehouse in Wellington, New Zealand, was sold at a loss to book value due to the depressed property valuations in that market. As a result, we expect to record a nonrecurring loss on sale of properties of approximately $2 million in the first half of this financial year. I note that in the 3.5 years since our IPO, 6 of the 7 properties that we have sold were at a premium to book value, and we have full confidence in the book value of the remaining $142.5 million of properties held by the DGL Group. Outlook. In terms of current trading, we expect to record a modest increase in revenue and gross margin for the half year with underlying EBITDA broadly in line with the prior half year. Net profit, before the nonrecurring IT and property write-downs that I’ve mentioned, is expected to be lower in this half than the prior year mainly due to increased depreciation and amortization. During the period October to February, we will incur additional costs of over $1 million as we transition from our dated and inefficient major New South Wales warehouse to new, more productive premises. We expect to gain efficiency benefits from this reinvestment into our operations. Statutory profit for the half year will be reduced by IT and property related write-downs. We are positive about the outlook for the full year and in our company's longer term growth prospects. I'd like to thank our shareholders for your continued support. We are determined to deliver for you. I invite our Chairman to begin the formal items of business. Thank you.

Thank you, Simon. I noted earlier that John West, one of our directors, was an apology, but I'm pleased to see he's been able to join the meeting, so all directors are present. I'll now proceed with the business of the meeting as outlined in the Notice of Meeting. I propose to take the Notice of Meeting and the accompanying explanatory memorandum as read. The first item of business is to table and receive the financial statements, directors' report and auditor's report of the company for the year ended 30 June 2024. A copy of the annual report was lodged with the ASX, and it was sent to all shareholders who requested it. As advised, we have the company's auditors in attendance if shareholders wish to ask them any questions. And we also have the company's Chief Financial Officer, Frank Izzo, who's available to take questions as well. Are there any questions on the reports and the conduct of the audit?

No questions have been received on the reports or the audit, Chair.

Thank you, Hanna. As there are no questions on the financial report, we'll now move to the formal resolutions, which can be considered at the meeting. As mentioned, all resolutions will be put to a poll, which will be conducted once all resolutions have been put to the meeting. Resolution 1 relates to the adoption of the remuneration report for the year ended 30 June 2024 as found in the annual report. The Corporations Act requires that the remuneration report be up for adoption at the meeting. However, the vote on the resolution is advisory only and does not bind the directors or the company. The Board will, however, take the outcome of the vote into consideration when reviewing remuneration practices and policies in the future. I'll now put the resolution to shareholders to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that, the remuneration report of DGL, which forms part of DGL's 2024 annual report for the financial year ended 30 June 2024, be adopted. Voting exclusions are contained in the explanatory memorandum accompanying the Notice of Meeting. Proxies received for resolution 1 are shown on the screen now, and I put the resolution to members. Are there any questions from shareholders specifically in relation to this resolution?

Yes, Chair. We've received one question. What are DGL's plans for staff retention to reduce the number of changes in senior management?

Okay. Thank you. Well, in FY '24, we reviewed our remuneration across the group to ensure that it's in line with market standards. This led to changes to align compensation with seniority and level of responsibility. And we also identified a gap where DGL currently has no employee incentive scheme, putting us at a disadvantage to our competition. So as a result, we're seeking approval at this meeting for a very conservative incentive plan with a general plan for all employees to buy shares and a limited performance share plan for senior executives, which has significant performance hurdles. So we believe this will help with staff retention.

No further questions.

Good. Thank you. I'll now proceed to the next item on the agenda. Resolution 2 relates to the reelection of Robert Sushames. I'll now put the resolution to shareholders to consider and, if thought fit, to pass the following resolution, that, Robert Sushames, a Director who retires by rotation in accordance with the company's constitution and being eligible and having signified his candidature for office, be and is hereby reelected a Director of the company. Proxies received for resolution 2 are shown on the screen now, and I put the resolution to members. Are there any questions from shareholders specifically in relation to this resolution?

No questions received, Chair.

Thank you. I'll proceed to resolution 3. Resolution 3 relates to the approval of the employee incentive securities plan. I now put the resolution to shareholders to consider and, if thought fit, to pass with or without amendment the following resolution as an ordinary resolution, that, for the purposes of Listing Rule 7.2, Exception 13(b), and for all other purposes, approval is given for the company to issue up to a maximum of 14,261,263 securities under the employee incentive scheme titled Employee Incentive Securities Plan, on the terms and conditions set out in the explanatory statement. Proxies received for resolution 3 are shown on the screen now, and I put the resolution to members. Are there any questions from shareholders online specifically in relation to this resolution?

Yes, Chair. We've received one question. Will the Board include a measure of total shareholder return in any performance right or employee incentive scheme?

Yes, we have. The performance rights plan for senior executives includes both earnings per share hurdles and total shareholder return performance hurdles, which are set out in the Notice of Meeting. We benchmarked the proposed plan against similar companies, and we consider the proposed plan is conservative relative to those peer companies. The performance hurdles apply over a 3-year period, and DGL would need to significantly outperform its peers for the performance rights to vest in full. As an example, the full vesting of the performance rights would require earnings per share to grow at 15% per annum over the 3-year period. And the total shareholder return measured by share price performance and any potential future dividends would need to be in the top 25% of all industrial companies in the ASX 300 Index. If these hurdles are achieved, we're very confident that all shareholders will benefit. Are there any other questions?

No further questions.

Thank you. I'll proceed to the final item of the formal business on the agenda. Resolution 4 relates to the issue of performance rights to the CEO under the employee incentive securities plan. I'll now put the resolution to shareholders to consider and, if thought fit, to pass with or without amendment the following resolution as an ordinary resolution, that, for the purposes of Listing Rule 10.14 and for all other purposes, approval is given for the company to issue 710,000 performance rights to Chief Executive Officer, Mr. Simon Henry, or his nominee, under the employee incentive securities plan on the terms and conditions set out in the explanatory statement. Proxies received for resolution 4 are shown on the screen now, and I put the resolution to members. Are there any questions from shareholders in relation to this resolution?

Yes, Chair, we've received one question. We've also received a related question for resolution 3. So to take the resolution 3 question first, is there a minimum holding period for the performance rights?

No, there isn't a minimum holding period, but the performance rights vest over a 3-year period. So no rights will vest for 3 years from the commencement of the plan.

And for the question that we've received on resolution 4, is the issue of performance rights to the CEO, Mr. Simon Henry, appropriate, considering he already has a large shareholding?

Okay. Well, Simon Henry is the Founder of DGL, and he does have a significant shareholding. But he's also the Chief Executive Officer, and it's appropriate that he has a competitive remuneration package. The performance rights are a common part of the CEO's remuneration. We believe the proposed plan for Simon is conservative relative to peer companies and his performance rights will be subject to the same significant performance hurdles that apply over a 3-year period. So again, we're confident that if these performance hurdles are met, that all shareholders will benefit from the company's share price.

Is there a share price target for any shares to vest?

The vesting conditions relate to earnings per share performance and relative share price performance. So for full vesting of those rights, it would require 15% per annum growth in earnings per share and for our share price performance to be in the top 25% of comparable industrial companies. So we think there are significant performance hurdles.

No further questions.

Thank you. Okay. Now that all resolutions have been put to the meeting, I direct that a poll be held for each of the resolutions. As Chairman, I'll be voting all proxies in favor of each resolution, as previously outlined. Voting is now open. Shareholders who have not lodged their proxy beforehand are encouraged to vote on the poll now. If you've already lodged your proxy, you don't need to vote again unless you want to change your vote. Voting in the poll is entirely optional. Shareholders and visitors who aren't voting, please click on skip poll. To cast your vote, please click on for, against or abstain and then click next to move to the next resolution. If any shareholder is having difficulty in voting online, please click on the raise hand function and our team will be happy to assist. Please now complete your voting for the 4 resolutions. [Voting]

Does anyone require more time for voting? Thank you. I declare the poll closed. That concludes the formal business of today's Annual General Meeting, and I declare the meeting closed at 11:34 a.m. The results of these resolutions will be released to the ASX shortly after the AGM concludes. I now open the opportunity for questions of a more general nature from shareholders. I'd ask shareholders to type in questions separately so that we can give all shareholders a fair and reasonable opportunity to ask a question. [Operator Instructions] Hanna, are any questions submitted?

Yes. We've received a large number of questions. So where we've received multiple questions that are similar, I'll amalgamate them into one question, or I'll read out the broadest question to cover the others. Chair, the first question is, is the company considering any change in senior management?

Well, we believe we have a strong management team, but we're always striving to attract the best talent for the business. In the last 12 months, we've appointed a new CFO, Frank Izzo, who's led the restructure of our finance team. And we've appointed a new General Counsel and Company Secretary, Hanna Posa, together with several other changes in the executive team. At this stage, we're not considering any other changes.

And the next question, for the trading update, is it compared to H1 FY '24 or H2 FY '24?

The comparison comments that Simon made were comparing the current half to H1 FY '24.

And we've had several questions on what is being done to increase revenue and profit and what is being done to improve the share price.

That's clearly a focus for the Board and the senior executives. DGL hasn't been immune to the factors that have impacted a wide range of companies in Australia, in particular, including higher costs, interest rates and volatility in commodities and supply chains. We've also seen our profitability return to a more normal trajectory after the higher earnings that we achieved during the COVID disruptions, which has contributed to our share price being marked down, we believe. We're pursuing a focused strategy to be a leading provider of specialized chemicals, materials and services to a wide range of essential industries, and we're investing in plant and equipment to increase capacity and improve efficiency and drive economies of scale with the aim of improving the bottom line. We're also doing the hard work of driving efficiencies through the full integration of the acquisitions that we've made in the last few years. There are significant benefits to come from this integration and from the investment in improved systems and centralized shared services. Most of these initiatives involve costs that depress profit in the short term, but we're confident that they'll improve profit in the medium to longer term. I can assure you that we're all very focused on the need to improve our performance. Simon, is there anything you'd like to add to that?

No, Tim, I think you've covered it well there. I'd like to reassure our shareholders that the senior management and right down to our site managers are intensively focused on controlling costs at every level and maximizing sales across the group. Clearly, we expect this to lead to improved profitability in future periods.

So the next question received, when does management expect that the business will not have to spend so heavily on building out the spine of the business, like ERP, tech and trucks, so that profitability can be more in line with what the market would expect?

Thanks, Hanna. We are going through a phase of system improvements and enhancements at the moment, which is really a factor of the scale that the business has reached and the rapid growth over previous years. So that process will be ongoing, but we are incurring heavier costs at the present time than we expect to in the next year or 2. So we expect to see those benefits come through quite quickly.

And what are the biggest challenges that the company is seeing when integrating the acquired companies?

I don't think the challenges we're seeing are any different from any other company. We're not having any particular issues, but the company has made multiple acquisitions in recent years, and each does require integration. The operational side is quite quick and easy to integrate, but there is some hard work to do to integrate the back office and bring all of the systems together onto common platforms to drive those efficiencies and economies. So we're not seeing anything that isn't common for business acquisitions. It's just a matter of getting all the work done.

It's likely that there will be a recession again in the next few years. Is the company looking to pay down debt so that it can take advantage of distressed assets that may become available for acquisition?

Thanks, Hanna. The company has reduced its debt levels somewhat in recent times and the property sales that Simon referred to earlier, the proceeds there largely went to reduction in debt. So we do have some spare capacity from our debt facilities, and we are generating cash, which provides funds for investment opportunities. So we believe we're relatively well positioned for that.

And has the Mount Isa plant gone online?

Not yet. But Simon, you might want to comment on that more specifically.

Thanks very much, Tim. It's in the middle of being commissioned now. In fact, our Chief Operating Officer could answer that question in more depth.

Yes. Thanks, Simon. Yes, you're correct. We're going through the commissioning phases now, and all is progressing well for that plant. But no, it's not operating as yet, but we have had product out of it, and we are continuing to commission. But yes, all is going well.

And what's the expected completion date of the liquid waste treatment facility? And what's the cause of the current delay in approvals?

Simon, you'd better answer that. I know it's a pet topic of yours.

Yes, I've been working on the project for 8 years. We are at the stage of waiting for one final sign-off so that we can complete development. We're in discussion with the New South Wales Fire Department on various elements of the infrastructure. We sincerely thought we would have had it by now, but this is a very slow and long-winded and frustrating process. Look, I've made multiple predictions of having it completed in other presentations to the market. I've been wrong. So I'm not going to make that mistake again. But rest assured that we're well and truly focused on getting the plant completed without any unnecessary delays.

And just to clarify, the reasons for the delays are outside our control. They're due to the maze of regulatory approvals, which keep getting more and more difficult to navigate. And as Simon mentioned earlier, while that is an impediment to putting these sort of facilities in place, it's also an advantage for DGL once they are in place because, in future, it's going to be harder to establish these facilities. So we've got a very valuable network of licensed facilities and operations that we can utilize.

The next question is for Simon specifically. What are the two to three greatest opportunities for growth for the business you see for the next 3 to 5 years?

Yes. So primarily, it will be extracting full value out of our licenses and facilities that we have established already. There is room for organic growth from these assets. It's really about us getting in front of our customers and offering them more services in the network of assets. I think that's the major area for growth. Once again, we're still seeing consolidation in the industries that we work in, established players leaving the market and fewer players remaining, but those players being of bigger scale. It's a highly complex and highly regulated industry that we work in. And frankly, there are probably fewer people that are interested in being involved with it. But those who do it with scale and have got the capital and the knowledge are likely to enjoy meaningful or substantial growth over the coming years.

And as a follow-up question, do you expect CapEx to decrease significantly in the next couple of years?

It's a good question. Our Chairman has mentioned that we don't plan to pay a dividend for the foreseeable future, but reinvest. So clearly, we are going to reinvest our earnings back in the business to grow. Whether that be invested into buying more companies or expanding our sites and growing organically is still to be decided. We are not compelled to spend capital. We elect to spend capital to build a business of scale.

And the next question is about the employee share plan. In terms of the timing, will the employee share plan be offered as soon as possible?

Yes, the intention is subject to shareholder approval to put that share plan in place as soon as possible, which includes the general plan for all employees to purchase shares and the performance rights plan.

Are there any current intentions to take the company private given Simon's recently purchased more shares on market and may receive more shares in performance rights?

Well, no, I can confirm that that's not something that's being considered. Simon, you might want to comment on your purchase of shares, but really, that reflected a valuation decision.

I'm passionate about DGL, and I plan to sit here for many years to come running and growing this publicly listed company, and I have no intentions whatsoever of taking it private.

A query on competitors, is Redox seen as a competitor to DGL across any segments or verticals?

Maybe I'll answer that, Tim.

Thanks, Simon.

We have a wonderful symbiotic relationship with Redox. We buy from them. We sell to them. We formulate for them. We provide logistics services for them. It couldn't be a healthier commercial relationship. I don't see them as a competitor.

And have you found any interest from external parties for a whole or partial takeover?

Look, from time to time, we've had approaches, but nothing that has progressed beyond very early-stage discussions. It's not something we're pursuing. We've got very strong opportunities for growth, and we're very intent on delivering value for shareholders through the strategies that we have in place. So there's certainly been nothing that we consider would be more attractive for shareholders than the path we're on.

And are there any thoughts on what the acquisition of Delta Ag by Elders would mean for DGL, being one of the biggest customers for the business?

Look, we don't consider that's going to be a significant issue for DGL. But Simon, you might want to comment on that.

Yes, we've thought about it in depth. We think it will be generally positive for DGL. DGL sits at the back of the supply chain. We don't interface with the consumer. We support Elders. We already work with Delta. So we would see our relationship with Elders growing. And obviously, we're keen to expand our services to Elders as they focus on the sales side of the business. So we see it generally as a positive. I mentioned in an earlier question about the fragmented industry becoming more consolidated and fewer but bigger players, I think Elders acquiring Delta is an example of this.

And given the regulations in the industry, how hard is the insurance renewal process? And is there any issues that insurers tend to raise?

I'll answer that, if you like, Tim. Yes, it's a significant challenge. It's a challenge for any company involved with chemicals. DGL now has substantial scale. So we're able to negotiate favorable insurance rates across our network. I think if you're running a small single site operation, you'd have a significant or a serious headache trying to get insurance. I believe we have the scale and the sophistication in the market and the disciplines in place to keep our assets safe whereby we'll be able to arrange competitive insurance.

And in a similar vein, are others leaving the industry because there's just not enough money to be made with all of these regulations?

I don't know of anyone leaving the industry because there's no money to be made or not making enough money. People are leaving the industry out of frustration or due to lack a of capital to invest in their sites to make them compliant or, as often the case across Australia and New Zealand, the founders are retiring and there's no family to take them over and they're looking for their businesses to be sold. And really, DGL is one of the only buyers for some of these formulation businesses.

And can you please provide an update on the lead acid battery recycling business?

Simon, do you want to cover that?

Yes, I'll talk openly about that. We are facing intense competition for scrap batteries. In 2022, there were effectively 3 operating plants in Australia. We owned 2 of them. Shortly, there will be 9. So there is increased competition, and it is having a significant impact on the profitability of recycling lead. It's an element of the business that's being discussed at Board level as to where we should be going with it.

And when making acquisitions, DGL is focused on unique assets and licenses. How does the Board think about return on investment on these? Would you accept a low ROI for a unique license or property?

Well, it might be the case that we'd accept a lower ROI if we thought we could leverage the capabilities that the license provides across our broader set of activities. But by doing that, we would improve the ROI. So we're pretty disciplined in the sort of returns that we want to get from acquisitions, and we're increasingly focused on that.

So we've received a number of different questions in terms of cost overruns for the head office transition, IT transition and the full integration of all the acquisitions. When does management anticipate that the costs will have been incurred and acquisitions will be fully integrated?

We would expect to see significant improvements in returns over the next 12 months or so. These integrations and changeovers to new and more efficient systems do take some time, but it's a process that's well underway. We're already seeing benefits. Our new ERP system is being cut over for segments of the business currently. So we are seeing those benefits come through, and we expect those to accelerate over the next 12 months.

In FY '25, the majority of the heavy lifting of the rollout of the ERP and the build-out of our head office in Parramatta will be completed. There will still be ERP rollout going into FY '26, but a substantial amount of the business will be on it by the end of this financial year.

And ignoring normal financial metrics, are there any alternate metrics the Board uses to measure success like number of customers or units produced?

Look, we monitor and measure a range of metrics, both financial and operational. So whether it's plant or fleet utilization, warehouse utilization, volumes going through various facilities, as well as the financial returns and the margins we're making, there's a range of measures that we're increasingly focused on.

And can we please have more information on what happened in Seven Hills with the community's creek?

Simon, do you want to touch on that?

Yes, certainly, because it was published in the media. The creek, some distance from our Seven Hills operation, turned blue. The EPA obviously visited a number of businesses in the neighborhood. We were one of them. They investigated our operations. And as is common with any EPA visit, they found a number of items that they thought we could be doing better, and we have rectified those shortcomings. But at this time, and I need to be careful how I say this, there is no further action being taken against DGL. And as it stands, there is nothing connecting DGL to the blue creek.

So we've had a request to ask a question verbally from [ Joshua Reilly ]. Are you there? Did you want to ask your question verbally?

I can't hear him there, Hanna. Joshua, if you're there?

It seems like we might have lost him. Okay, we'll move on. We are getting to the point where I think we have tried to read out questions from each shareholders, but where shareholders have included a number of questions, we can follow these up after the AGM via e-mail. So for our last question, it's been said that the split between organic and inorganic growth is around 45% to 55%, but organic growth seems stagnant. Does the company have any ideas about the reasons behind this?

Well, the primary reason for that is some of the cost pressures that we've seen both with inflation and higher interest rates that have impacted on some of the benefits that we've been able to extract from acquisitions. But we are very focused on organic growth and tipping the balance in favor of organic growth. A lot of the investments that we're doing now are organic in nature and will improve the level of organic growth going forward, and we're very confident of that. Simon, please add to that, if you like.

Yes. So we're working mainly across Australia and New Zealand. New Zealand is in recession. That has an effect on our business. Australia is suffering from some of its lowest growth rates in decades. That doesn't help us. I look at our competitors, Mainfreight and others, they've all had substantial drops in profit. So obviously, we're fighting a soft market, and to grow organically in that environment is hard work. As Tim has mentioned, we've got a number of developments underway, and they're all organic growth in nature, and we expect to see sort of the benefit of these coming on stream in the second half and further into FY '26.

And given the strong foundation DGL has built over the years, what strategic partnerships or collaborations are you open to exploring that could enhance your growth trajectory and operational efficiencies?

Well, in general terms, we work very closely with a very wide range of industry across Australia. So we work very collaboratively with a large number of organizations. And a lot of the opportunities we see are for acquisitions where we can generate value by bringing other businesses into the group, expanding our product sets, expanding our customer base, and we're more focused on that. We're not currently considering any other sort of joint ventures or other collaborations specifically.

Tim, if I can add to that, over the last 18 months, we've been very successful in becoming accredited suppliers to some of the world's biggest chemical companies, sophisticated chemical companies out of North America, Europe and through Asia and bringing more business into DGL. And I expect that these relationships that we have managed to establish will be significant drivers of growth over the coming periods. It's a feather in our cap. There's been a lot of work that's gone into it. But the future for DGL actually lies in partnering with big international chemical companies.

Okay. And as a final question, would you consider entering markets beyond Australia and New Zealand?

Very carefully, but we are already active in and out of a number of international markets. But Simon, you could comment more specifically.

Yes. We most certainly are. We are proudly formulating and manufacturing chemicals in Australia and exporting them worldwide now. We have increasing complex relationships with chemical companies based abroad. We do not rule out some form of partnership or even stand-alone chemical formulation and packing plant somewhere in Asia, whether that's Thailand or China or a partnership. So we do have a number of initiatives on the go, but I don't think you'll see anything in the next 12 months being established outside Australia and New Zealand as a physical foothold, but I certainly don't rule it out in the longer term.

Okay. There are still some questions, and we do thank all shareholders for their interest. But given the time, we'll respond to any additional questions to shareholders directly via e-mail. Please also feel free to reach out to us directly if you haven't submitted a question, but you have something you'd like to ask. Back to you, Tim.

Okay. Thank you, Hanna. Well, that concludes our Annual General Meeting today. Thank you again all for your attendance and for your ongoing interest in DGL. We have an exciting year and years ahead of us, and we look forward to providing you with further updates. Thank you very much.